This paper presents a discussion of the impact of the physical design of day care settings on children and adults. Specifically addressed is the question of how the location and design of the facility, the arrangement of indoor and outdoor space, and the organization of the furniture and materials affect the behavior of the adults and children who use the space. Section I of the paper presents overall recommendations for the continuation of the Federal Interagency Day Care Requirements (FIDCR) as they pertain to the physical environment of day care programs. Section II presents a discussion of specific regulations included in the FIDCR. This discussion examines specific regulations pertaining to location and zoning, safety and sanitation, needs of handicapped children, square footage, indicators of quality space design, outdoor space, and equipment and materials. The discussion of each topic includes a review of current standards and recommendations for changes. Section III presents specific recommendations for improving the implementation of the FIDCR. Included are recommendations for helping caregivers meet the Federal regulations and recommendations for helping caregivers find and arrange space for their day care programs. (BD)